On 1 July 2022, Aspect Medical Ltd entered into a non-cancellable three-year lease
agreement to lease two MRI scanners from Philips Healthcare Ltd. Aspect Medical Ltd paid $35,000 on
signing the agreement on 1 July 2022. The contract requires Aspect to make half-yearly lease payments
of $280,000, on 30 June and 31 December, each year, commencing on 31 December 2022. Included
within the $280,000 half-yearly lease payments is an amount of $90,000 representing payment to Philips
for insurance and maintenance of the scanners.

The scanners are expected to have a useful life of 5 years, after which time it is expected to have a
salvage value of $45,000. The bargain purchase option is exercisable by Aspect Medical Ltd at the end of
the lease term for $123,000. The equipment is to be depreciated on a straight-line basis. The interest
rate implicit in the lease contract is 12% per annum.

Requirements (rounded to the nearest dollar):

a) Calculate the lease liability and lease asset for Aspect Medical Ltd (show workings);
b) Prepare a full lease schedule for Aspect Medical Ltd., showing the division of the lease rental
into interest and principal components; and
c) Provide the journal entries for the lease transactions in the books of Aspect Medical Ltd for the
financial year ending 30 June 2023 (from 1 July 2022 to 30 June 2023). Narrations are not
required

Answer rating: 100% (QA)

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